Dreaming of owning your first home or expanding your property portfolio? You might be surprised to learn that you can use your superannuation to make it happen. Whether you’re eyeing the First Home Super Saver (FHSS) scheme or considering a self-managed super fund (SMSF), there are pathways available to help you step into your new home faster. Read on to find out how you can unlock the power of your super to achieve your property goals!
How Can You Leverage Your Super to Buy a House?
Ever wondered if your superannuation can help you buy a home? The short answer is yes, but it’s a bit more intricate than just stumping up a deposit for a standard home loan. You have two interesting options: the First Home Super Saver (FHSS) scheme and using a self-managed super fund. Each offers unique benefits and is tailored for different needs—whether you’re a first-time buyer or already managing an SMSF. Curious to see how these options can work for you? Let’s dive in!
Exploring the First Home Super Saver Scheme
The FHSS scheme is a federal government initiative that helps first-time buyers save for a home deposit within their super fund. With potentially better returns than a high-interest savings account, thanks to the lower tax advantages of superannuation, it’s an opportunity worth considering.
How Does It Work?
The FHSS scheme lets eligible first-time home buyers make voluntary contributions to their super fund, up to $15,000 per year, both before-tax and after-tax. These contributions benefit from a lower tax rate of just 15%, compared to the regular tax rates. Contributions from your employer and any additional voluntary payments count towards this cap.
Who Can Take Advantage?
To make the most of the FHSS scheme, you need to meet a few criteria:
- Be at least 18 years old when applying for a FHSS determination or release (but you can contribute before turning 18).
- Be an eligible first-time home buyer with no previous property ownership in Australia, including investments, vacant land, or commercial properties.
- Plan to move into the property within a reasonable time and live there for at least six months within the first year.
- Have not previously requested a FHSS release.
One benefit is that eligibility is assessed individually, so couples, friends, or family members can combine their FHSS contributions to purchase the same property!
Can a Mortgage Broker Help with the FHSS Scheme?
Absolutely! A licensed mortgage broker, like us here at AXTON Finance, can be your guide through the FHSS maze, offering:
- Expert Insights: Navigate the complexities of home loans and government schemes with ease.
- Financial Evaluation: Determine how much you can contribute and withdraw.
- Loan Recommendations: Find the perfect loan to match your FHSS goals.
- Application Assistance: Get help with paperwork to avoid mistakes.
- Pre-Approval Guidance: Know your budget with pre-approval support.
- Ongoing Help: Receive support throughout your home buying journey.
Connect with an experienced Axton Finance mortgage broker to harness the full potential of the FHSS scheme.
Using a Self-Managed Super Fund (SMSF) to Buy Property
Another exciting option is using an SMSF to buy property. While more complex, it offers a chance to invest in real estate through your super. Note that SMSFs can’t be used for personal residences, but you can buy investment properties.
How Does It Work?
To purchase property with an SMSF:
- Your SMSF should have a substantial balance (ideally $200,000 or more).
- Maintain a liquidity buffer of about 10% of the property’s value so that you don’t completely drain your fund.
- Be aware of borrowing restrictions; you can’t use the entire fund balance for the purchase, use the property for any personal reason, lease it to friends or family and there are restrictions around what sort of renovations/developments can be made.
How Much Can You Use?
For SMSF borrowing, your balance will influence what you can borrow. Most lenders will allow you to borrow up to 60-80% of the value of the property being purchased. For example, with a $300,000 SMSF balance, you might use $200,000 as a deposit to borrow $400,000 for a $600,000 investment property. This would be approximately a 66% LVR (Loan to Valuation Ratio).
For tailored mortgage advice that fits your unique situation, consult an Axton Finance mortgage broker in Brisbane or nearby locations.
How Can Axton Finance Help You Reach Your Property Goals?
Whether you’re buying your first home or investing in property, the Axton Finance team are here to guide you through using your superannuation effectively. Whether it be via a purchase within your SMSF (Self Managed Super Fund) to building a better deposit to buy your first home via the FHSS (First Home Savers Scheme), we’re ready to help you achieve your property dreams faster. Contact us today to get started!
